Defending the Bayh-Dole Act or why the government shouldn't determine drug prices

For decades, Americans have relied on the careful balance between the U.S. government and sponsored private investors in the development of a variety of new medicines that address health conditions for millions of people. We have benefited financially and medically from the partnership.

That relationship is now under threat.

The Bayh-Dole Act of 1980 allowed companies that acquired federally sponsored inventions to retain and profit from licensed ownership. For more than 40 years, this law has benefited Americans and the world in major drug discovery. Federally funded research currently accounts for about one-third of U.S. patents.

The law provides for “march-in rights,” which allow the government to exercise some control over patents developed with some public funding and ensure public access. Petitions seeking these rights have been filed over the years with little success.

In December 2023, the National Institute of Standards and Technology, which is responsible for implementing Bayh-Dole, approved a “march-in right” that allows federal agencies to acquire private intellectual property for drugs if the drug's price is high. Published draft guidance on expansion. considered “unreasonable”.

A fundamental rule of free market capitalism is the right to profit from inventions and discoveries. Without a balance of incentives and protection, inventors cannot accept the risks associated with research and development to discover new products and bring them to market.

In the United States, Congress's response to the economic downturn of the 1970s included control of the inventions produced by government-sponsored research and development. At the time, inventors receiving federal funding were required to transfer their inventions to the federal government unless the public interest was better served by allowing them to retain exclusive rights. As a result, the government accumulated thousands of patents through research and development, but less than 5% were commercially licensed. Too many missed opportunities!

If accepted, the National Institute of Standards and Technology's proposal would harm American businesses, workers, consumers, and patients by reducing investment and technological progress. Developers will no longer be able to obtain licenses discovered through government-funded research. Giving federal agencies control over intellectual property would stifle competition and private investment, especially for startups, where the riskiest initiatives and advances are often made. Its effects will be felt around the world and threaten global health progress.

For example, Canadians are well aware that the government has the right to set drug prices and threaten drug developers' intellectual property if they do not comply with government demands. For many years, “compulsory licenses” have allowed generic copies of patented medicines to be manufactured or imported into Canada.

In contrast, the Bayh-Dole Act requires investors and inventors to protect the intellectual property rights of their discoveries and products by investing time, effort, and money in startups that rely on exclusive patent licenses. It gives assurance that it can be managed. As a result, research in the private sector and universities in the United States has increased dramatically to develop new life-saving treatments and provide significant value to patients. Bayh-Dole works well with the U.S. Orphan Drug Act of 1982 to reduce barriers and provide incentives for scientists and investors to make big bets on the small market for orphan drugs for rare diseases.

U.S. innovators must maintain their intellectual property rights to deliver the returns that current and future investors expect. The new interpretation of the right of entry causes significant uncertainty. If drug developers risk losing exclusive licenses for their products, investors are likely to move their money elsewhere.

Expanding march-in rights would also create an avenue for other governments and companies to abuse the process and claim access to U.S. intellectual property. This will hurt not only U.S. businesses and patients, but also businesses and patients in other developed countries.

The National Institute of Standards and Technology should rescind its inappropriate proposal. Continuing research into new treatments that benefit Americans and patients around the world, especially those in need, needs to be protected.

Nigel Lawson is a senior fellow at the North American Center for Prosperity and Security.

John Adams is the co-founder and CEO of Canadian PKU and Allied Disorders Inc. He is a senior fellow at the North American Center for Prosperity and Security. He is also the volunteer board chair of the Best Medicines Coalition.